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Income Tax Makes States Radioactive To Sports Stars

Add Ndamukong Suh to the ever-growing list of professional athletes who are bidding farewell to their high-tax home state in favor of sunnier economic climates. Suh – considered one of the top-two players in free agency this season – is leaving Detroit for Miami. By doing so, the defensive tackle will give himself a significant tax discount.

Players as talented as Suh can essentially name their price, and they can reject offers that include the undesirable “catch” of a whopping tax bill. The Lions, of course, wanted to keep their star player, and the Oakland Raiders also pursued Suh. Michigan takes 4.25% of residents’ earned income, while California nabs a staggering 13.3%. Suh’s deal with the Miami Dolphins is $114 million. If he were offered a similar contract by the Lions, he’d lose nearly $5 million to the state. If he took up the Raiders on an equivalently priced offer, California would nab more than $15 million. By moving to Miami, Suh will keep much more of his money, as Florida levies no personal income tax.

Ndamukong Suh’s deal with the Miami Dolphins is $114 million. If he were offered a similar contract by the Lions, he’d lose nearly $5 million to the state. (Photo by Sarah Glenn/Getty Images)

Star athletes lend prestige and excitement to the places they call home. Because their career and their high net worth allow them to be so mobile, high-tax states struggle to keep sports pros who are tired of forking over large amounts of their earnings. States like California can be especially unappealing: Not only is the income tax incredibly high, but the state sales tax is the highest in the nation. Even players who are just passing through California get a taste of its punitive tax structure; as author and tax attorney James Lacy told Breitbart Sports, “Add in a special per-game ‘jock tax’ imposed on out-of-state players, and what you end up with is a very inhospitable tax environment for all professional athletes in California.”

NFL stars aren’t the only athletes seeking residence in low- or no-tax states. Last year Phil Mickelson made headlines for criticizing California’s hefty tax bite and vowing to move to Florida. (In fact, he just sold his estate in San Diego County.) Tiger Woods headed to Florida as soon as he turned pro in 1996, leaving California behind. According to estimates in the Wall Street Journal, Woods’ tax savings over the course of his career now amounts to more than $100 million. PGA Tour Commissioner and former advisor to President Jimmy Carter noted that Mickelson’s and Woods’ decisions are not unique to pro athletes, and that “there are businesses relocating out of California because they can operate better in states that have lower tax rates.” This is certainly the case, as IRS taxpayer data shows that the Golden State lost $46.32 billion in net adjusted gross income between 1992 and 2011 (and nearly 580,000 people left California between 1985 and 2011).

Add Ndamukong Suh’s tremendous talent and significant spending power to Florida’s win column, and expect to see similar moves take place in other star athletes’ playbooks. During the same time periods mentioned above, Florida gained 1.7 million residents and $100.53 billion in net AGI. Other athletes, not to mention businesses and families, would do well to take a look at the opportunities afforded by no-income-tax states. Sports franchises in these states – including Tennessee, Washington, and Texas – have an incredibly powerful home-field advantage.